The US stock market finally shook its post-election slump. Investors seized on hope that Washington will reach a deal on the federal budget and drove stocks Monday to their biggest gain in two months. A pair of strong corporate earnings reports also helped.
U.S. stocks rallied, logging their best gains in months, as investors started the holiday-shortened week optimistic that fiscal cliff negotiations in Washington are progressing.
The Dow Jones industrial average jumped more than 200 points, or 1.7%, with financial stocks Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) among the top leaders. The S&P 500 added 2% and the Nasdaq surged 2.2%.
Technology stocks were also big gainers, with Apple (AAPL, Fortune 500) jumping more than 7%.
The day’s gains were the biggest since early September for the Dow and S&P 500. The Nasdaq had its best day since July.
Asian stocks also rose Tuesday as investors gained confidence that President Barack Obama and the U.S. Congress will reach a budget deal to avert tax hikes and spending cuts that could throw the world’s No. 1 economy into recession.
“The question of whether or not the fiscal cliff will be avoided is impossible to answer with any degree of certainty, but the political reality does indicate that some sort of compromise may be possible,” said Bob Doll, senior advisor at BlackRock, to CNN.
The two sides still appear to be quite far apart on some important issues, particularly regarding a potential tax increase for higher-income Americans. But the parties are at least attempting to avoid brinksmanship.